NHS: Staff

Lord Warner Excerpts

Thursday 30th November 2017 Lords Chamber

[Lord Warner (CB)]

My Lords, the noble Lord, Lord Clark, deserves our thanks for providing this opportunity to discuss what I would call the bleak direction of travel that this Government are setting for our health and care system. I congratulate him on his robust and thoughtful analysis, which I share. It was also a privilege to hear my noble friend Lady Emerton. I, like others, will miss her wisdom in the future.

Next year the NHS will be 70. For much of its existence it has had an annual funding increase averaging about 3% to 4% in real terms. Since 2010 the annual increase has shrunk to less than 1.5%. During this decade the NHS has become rather like a pensioner finding it difficult to live in the style to which it was accustomed. It now faces an uncomfortable old age, partly because it failed to change its business model when it had the chance, but increasingly because of this Government’s obsession with both a reckless Brexit and a linked fiscal policy based on unrealistic national debt reduction.

First, I acknowledge that the NHS has contributed, to some extent, to its current problems. For too long it has been reluctant to change its hospital-centric business model when the changing demography and disease profile of its customers strongly suggested that it should. For too much of its history too many NHS leaders have distrusted local government and, for the most part, until recently, have failed to understand the NHS’s dependence on a reliably-funded adult social care sector. Even when there have been sensible plans for change, an adequate investment strategy has usually been lacking. Certainly, there has been a failure to provide a strategy for reshaping a workforce that needed to work differently and more innovatively, embracing new technology in all aspects of its work. If you add in an expensive and misguided Conservative-led reorganisation five years ago, it is not difficult to see how poorly placed the NHS and its staff are to deal with what comes next.

The state of our health and care system is evidenced in the report by this House’s Select Committee on the Long-Term Sustainability of the NHS, of which I was a member. The report was published in April and we still await any response from the Government, other than the Minister telling us that it is on his desk. The report also presents a powerful body of evidence on the damage done to the prospects of NHS sustainability by the persistent failure by Governments to fund adequately adult social care, even taking account of the £2 billion now being invested over three years. This sector is experiencing a serious reduction in the provision and quality of publicly funded adult social care, as the loss of 4,000 nursing home beds in a single year demonstrates. In turn, it is placing an increased and unnecessary burden on the NHS and its staff.

Brexit and the Government’s fiscal policy will now administer new shocks to an already battered NHS workforce. No doubt the Minister would prefer it if I did not mention Brexit but I am afraid I do not inhabit the “Mary Poppins” world of many Ministers on this subject. It is now important that the public understand that far from producing an additional £350 million a week for the NHS, Brexit will seriously damage the NHS. I can find no credible economist who believes that leaving the single market and the customs union—the Prime Minister’s declared aim—can do other than reduce our GDP, with any compensating new trade deals a very long way off in the future. Companies are already making their dispositions accordingly and many more are likely to do so early in 2018.

A few success stories in the life sciences sector do not alter the bigger picture—one in which the tax take goes down as the economy shrinks and there is less money for public services. We can already see the impact of Brexit on the public finances with the £3 billion Brexit contingency fund in the Budget, and more to come to pay a divorce bill somewhere north of £40 billion—unless the Minister has some better figures.

We have discussed on several occasions the impact of Brexit on the supply of EU staff to our NHS and social care system. The total failure of this Government to provide a cast-iron commitment to EU staff working here about their future in the UK has led to a worrying exit of valued staff from our health and care system. This outflow is likely to increase further and faster in 2018. Wise heads in the NHS are already trying to plug the gaps from other sources but this will be a big ask in the short term, and the cost of replacement is likely to be greater than retaining those staff who have been lost. Our long-term failure to become more self-sufficient in the staffing of our health and care system will be seriously exposed by Brexit. Staff account for two-thirds of the costs of running the NHS and we will have to pay more than now to recruit, train and retain staff. This will be a big financial pressure, which has not been reflected in the Chancellor’s Budget.

Finally, I turn briefly to fiscal policy. The Office for Budget Responsibility’s assessments accompanying the Budget show economic growth declining, poor national productivity and an inflation rate much higher than health and care spending. The Chancellor continues his predecessor’s obsession with reducing the national debt. Despite this—what I can call only—austerity fetishism, the Government have missed all their debt reduction targets, continuously damaging public services into the bargain.

This Budget falls a long way short of a credible response to the challenges that the health and care system faces for the rest of this Parliament—always assuming that the Government last that long. Most seriously, there was no relief for adult social care, which is now massively underfunded after a 25% cut in real terms since 2010. The promised Green Paper on social care will now not appear before next summer, having been promised for this autumn. Meanwhile, our elderly and disabled population can expect in many parts of the country to have reduced access to social care services, as more providers exit the publicly-funded part of that sector. This will put further pressure on the NHS.

Apart from £10 billion of capital in the Budget, mainly, I suspect, from NHS land sales, the Chancellor has provided an extremely modest revenue increase for the NHS. There is £350 million—again, £350 million but only for a whole year—in the current year. There will be another £1.6 billion in 2018-19 and a further £0.8 billion in 2019-20. This falls well short of covering the likely cost of inflation over the period. The black hole in the NHS budget at the end of this Parliament is expected to be at least £20 billion.

My understanding is that any pay increase for staff in this period will depend on a productivity deal. Having tried to negotiate productivity deals with the NHS unions in the past I can assure the House that this is a notoriously difficult thing, both to achieve and to satisfy the Treasury that you have done so. In practice, if some staff are to get more it is highly likely that others will get less, unless the Government put in much more money, which currently looks highly unlikely. We now have an NHS workforce who have had the best part of a decade with capped pay increases, often below inflation, and now face a period of great work pressure, with inflation of around 3% a year and no certainty over their pay. This seems a bit like being a boxer who thought he was in a 10-round bout but now finds his bout is one of 15 rounds.

In conclusion, the Government’s 70th birthday present to the NHS seems to be a few bandages for the wounds, continuing short rations and no investment in reform. To quote the Royal College of Physicians, the NHS will remain, “underfunded, underdoctored and overstretched”. The enthusiastic Brexiteers now need to reflect on the consequences of what they wished for.